Govt targets strict budget management

26 Oct, 2018 - 10:10 0 Views
Govt targets strict budget management

eBusiness Weekly

HARARE – The 2019 national budget, which  will be presented in November, will contain measures to strengthen  revenue collection and minimising government expenditure to reduce the  ballooning budget deficit which stood at $1.12 billion by June, the  Ministry of Finance and Economic Development has said.

According to a pre-budget strategy paper obtained by New Ziana, a  drastic reduction of the budget deficit to 5.2 percent of GDP in 2019 is  targeted.

Subsequent reductions to 3.5 percent in 2020 and 3.1 percent of GDP by

2021 would be pursued in compliance with the SADC threshold of below 3  percent of GDP.

“The huge deficit for the period to June, 2018 is as a result of mainly  unbudgeted expenditures and this calls for urgent reforms in order to  contain the expenditures, achieve the fiscal consolidation objective and  create fiscal space for developmental budget and social services  expenditure,” read the paper.

“In that regard, the 2019 Budget will focus on improving revenue  collection and containing current expenditures while increasing social  service spending and developmental budget. Social services spending and  developmental budget spending are peculiar in that they reduce poverty,  improve the standards of living of all citizens and foster economic  development.”

According to the paper, revenue collections for the first half of the  year amounted to $2.51 billion against a target of $2.21 billion,  resulting in a positive variance of $0.30 billion.

But, total government expenditure during the same period stood at $3.72  billion against targeted expenditure of $2.60 billion, implying an  expenditure over-run of $ 1.12 billion.

The half year budget deficit emanated mainly from pension  disbursements, upward review of health sector specific allowances which  led to an additional monthly bill of $12 million, as well as filling of

2 282 nursing posts in the health sector.

Budget expenditure also shot up due to the channeling of funds towards  agriculture input support schemes, grain procurement, roads and dam  construction as well as capitalisation of public institutions.

During the period, the deficit was financed through issuance of  treasury bills and through a Central Bank overdraft facility.

Hence, the strategy paper proposes a strict adherence to some legal  borrowing requirements including debt ceiling as a ratio of GDP.

For example, section 11(1) of the Reserve Bank Act [Chapter 22:15]  requires that Central Bank lending to the State at any time shall not  exceed 20 percent of previous year’s government revenues, but the  stipulated threshold has been surpassed.

The legal requirements, if adhered to, are integral in improving fiscal  management.

“In the absence of sustained fiscal discipline and strong expenditure  containment policy measures, the pointers are of a worsening position  over the period 2018-2020,” it said. – New Ziana

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